1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
______________________________
Commission file number 1-7629
HOUSTON INDUSTRIES INCORPORATED*
(Exact name of registrant as specified in its charter)
Texas 74-1885573
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1111 Louisiana
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 207-3000
(Registrant's telephone number, including area code)
______________________________
Commission file number 1-3187
HOUSTON LIGHTING & POWER COMPANY*
(Exact name of registrant as specified in its charter)
Texas 74-0694415
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1111 Louisiana
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 207-1111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No _
______________________________
*On August 6, 1997, Houston Industries Incorporated (Company) merged with and
into Houston Lighting & Power Company (HL&P), which was renamed "Houston
Industries Incorporated" (Houston). Pursuant to the merger, each outstanding
share of Company common stock was converted into one share of Houston common
stock (including associated preference stock purchase rights). As of August 6,
1997, Houston had 294,637,686 shares of common stock outstanding, including
12,669,031 ESOP shares not deemed outstanding for financial reporting purposes.
All treasury shares of the Company and all shares of Class A and Class B common
stock of HL&P were canceled in the merger.
2
HOUSTON INDUSTRIES INCORPORATED AND HOUSTON LIGHTING & POWER COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
This combined Form 10-Q is separately filed by Houston Industries Incorporated
and Houston Lighting & Power Company. Information contained herein relating to
Houston Lighting & Power Company is filed by Houston Industries Incorporated
and separately by Houston Lighting & Power Company on its own behalf. Houston
Lighting & Power Company makes no representation as to information relating to
Houston Industries Incorporated (except as it may relate to Houston Lighting &
Power Company) or to any other affiliate or subsidiary of Houston Industries
Incorporated.
TABLE OF CONTENTS
Part I. Financial Information Page No.
- ------ --------------------- --------
Item 1. Financial Statements
Houston Industries Incorporated and Subsidiaries
Statements of Consolidated Income
Three Months and Six Months Ended
June 30, 1997 and 1996 3
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996 4
Statements of Consolidated Cash Flows
Six Months Ended June 30, 1997 and 1996 6
Statements of Consolidated Retained Earnings
Three Months and Six Months Ended
June 30, 1997 and 1996 7
Notes to Consolidated Financial Statements 13
Houston Lighting & Power Company
Statements of Income
Three Months and Six Months Ended
June 30, 1997 and 1996 8
Balance Sheets
June 30, 1997 and December 31, 1996 9
Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996 11
Statements of Retained Earnings
Three Months and Six Months Ended
June 30, 1997 and 1996 12
Notes to Financial Statements 13
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 19
Part II. Other Information
- ------- -----------------
Item 1. Legal Proceedings 27
Item 4. Submission of Matters to a Vote of 27
Security-Holders
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 30
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
HOUSTON INDUSTRIES INCORPORATED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- --------------------------
1997 1996 1997 1996
---------- --------- ---------- -----------
REVENUES:
Electric utility . . . . . . . . . . . . . . . . . . $1,043,020 $1,099,971 $1,899,554 $1,911,936
Other . . . . . . . . . . . . . . . . . . . . . . . . 21,428 13,792 42,995 26,248
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . 1,064,448 1,113,763 1,942,549 1,938,184
---------- ---------- ---------- ----------
EXPENSES:
Electric Utility:
Fuel . . . . . . . . . . . . . . . . . . . . . . . 247,033 300,666 466,362 498,288
Purchased power . . . . . . . . . . . . . . . . . . 78,632 74,137 179,624 152,316
Operation and maintenance . . . . . . . . . . . . . 260,823 237,366 444,456 430,814
Taxes other than income taxes . . . . . . . . . . . 58,608 65,303 121,420 127,868
Depreciation and amortization . . . . . . . . . . . . 131,897 129,511 262,887 258,858
Other operating expenses . . . . . . . . . . . . . . 40,283 20,500 64,412 46,293
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . 817,276 827,483 1,539,161 1,514,437
---------- ---------- ---------- ----------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . 247,172 286,280 403,388 423,747
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Litigation settlements . . . . . . . . . . . . . . . (95,000)
Time Warner dividend income . . . . . . . . . . . . . 10,312 10,402 20,715 20,805
Allowance for other funds used
during construction . . . . . . . . . . . . . . . . 585 1,051 (142) 2,182
Other - net . . . . . . . . . . . . . . . . . . . . . (566) 1,073 (1,601) (662)
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . 10,331 12,526 18,972 (72,675)
---------- ---------- ---------- ----------
INTEREST AND OTHER CHARGES:
Interest on long-term debt . . . . . . . . . . . . . 60,293 68,857 123,094 140,252
Other interest . . . . . . . . . . . . . . . . . . . 18,682 9,475 35,093 11,049
Distribution on trust securities . . . . . . . . . . 7,155 11,673
Allowance for borrowed funds used
during construction . . . . . . . . . . . . . . . . (745) (672) (1,845) (1,357)
Preferred dividends of subsidiary . . . . . . . . . . 97 5,313 2,222 11,945
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . 85,482 82,973 170,237 161,889
---------- --------- ---------- ----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . 172,021 215,833 252,123 189,183
INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . 50,558 70,499 71,040 60,589
---------- --------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . $ 121,463 $ 145,334 $ 181,083 $ 128,594
========== ========= ========== ==========
EARNINGS PER COMMON SHARE . . . . . . . . . . . . . . . . $ 0.52 $ 0.58 $ 0.77 $ 0.52
DIVIDENDS DECLARED PER COMMON SHARE . . . . . . . . . . . $ 0.375 $ 0.375 $ 0.75 $ 0.75
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (000) . . . . . . . . . . . . . . . . . 233,919 248,656 233,805 248,561
See Notes to Consolidated Financial Statements.
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HOUSTON INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
ASSETS
June 30, December 31,
1997 1996
------------- -------------
PROPERTY, PLANT AND EQUIPMENT - AT COST:
Electric plant:
Electric plant in service . . . . . . . . . . . . . . . . . . . . . . $ 12,524,704 $ 12,387,375
Construction work in progress . . . . . . . . . . . . . . . . . . . . 173,555 251,497
Nuclear fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251,964 241,001
Plant held for future use . . . . . . . . . . . . . . . . . . . . . . 48,631 48,631
Other property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,207 86,969
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,117,061 13,015,473
Less accumulated depreciation and amortization . . . . . . . . . . . . . 4,481,491 4,259,050
------------- -------------
Property, plant and equipment - net . . . . . . . . . . . . . . . 8,635,570 8,756,423
------------- -------------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . 8,966 8,001
Special deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10
Accounts receivable - net . . . . . . . . . . . . . . . . . . . . . . . . 28,826 36,277
Accrued unbilled revenues . . . . . . . . . . . . . . . . . . . . . . . . 56,342 77,853
Time Warner dividends receivable . . . . . . . . . . . . . . . . . . . . 10,313 10,313
Fuel stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,846 61,795
Materials and supplies, at average cost . . . . . . . . . . . . . . . . . 123,781 130,380
Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,281 19,291
------------- -------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 297,371 343,920
------------- -------------
OTHER ASSETS:
Investment in Time Warner securities . . . . . . . . . . . . . . . . . . 990,000 1,027,500
Deferred plant costs - net . . . . . . . . . . . . . . . . . . . . . . . 574,461 587,352
Equity investments in and advances to foreign and
non-regulated affiliates - net . . . . . . . . . . . . . . . . . . . . 682,193 501,991
Regulatory tax asset - net . . . . . . . . . . . . . . . . . . . . . . . 358,474 362,310
Deferred debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345,770 306,473
Unamortized debt expense and premium on
reacquired debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,812 153,823
Recoverable project costs - net . . . . . . . . . . . . . . . . . . . . . 143,120 163,630
Fuel-related debits . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,466 84,435
------------- -------------
Total other assets . . . . . . . . . . . . . . . . . . . . . . . 3,363,296 3,187,514
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,296,237 $ 12,287,857
============= =============
See Notes to Consolidated Financial Statements.
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HOUSTON INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
CAPITALIZATION AND LIABILITIES
June 30, December 31,
1997 1996
------------- -------------
CAPITALIZATION:
Common Stock Equity:
Common stock, no par value . . . . . . . . . . . . . . . . . . . . . . . . $ 2,450,312 $ 2,446,754
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . (361,196) (361,196)
Unearned ESOP shares . . . . . . . . . . . . . . . . . . . . . . . . . . . (238,534) (251,350)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,003,194 1,997,490
Unrealized loss on investment in Time Warner
common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,737)
------------- -------------
Total common stock equity . . . . . . . . . . . . . . . . . . . . . 3,853,776 3,827,961
------------- -------------
Cumulative preferred stock of subsidiary, no par
value, not subject to mandatory redemption . . . . . . . . . . . . . . . . 9,740 135,179
------------- -------------
HL&P obligated mandatorily redeemable securities of
subsidiary trusts holding solely subordinated
debentures of HL&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,785
------------- -------------
Long-Term Debt:
Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349,190 349,098
Long-term debt of subsidiaries:
First mortgage bonds . . . . . . . . . . . . . . . . . . . . . . . . . 2,495,078 2,670,041
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156,345
Pollution control revenue bonds . . . . . . . . . . . . . . . . . . . . 118,000 5,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,057 1,511
------------- -------------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . 3,120,670 3,025,650
------------- -------------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . 7,324,971 6,988,790
------------- -------------
CURRENT LIABILITIES:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,301,809 1,337,872
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,121 157,682
Taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,777 191,011
Interest accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,448 67,707
Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,548 92,515
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,808 53,633
Current portion of long-term debt and preferred
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,129 254,463
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,509 89,238
------------- -------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 1,904,149 2,244,121
------------- -------------
DEFERRED CREDITS:
Accumulated deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 2,250,286 2,265,031
Unamortized investment tax credit . . . . . . . . . . . . . . . . . . . . . . 363,992 373,749
Fuel-related credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,390 74,639
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362,449 341,527
------------- -------------
Total deferred credits . . . . . . . . . . . . . . . . . . . . . . . 3,067,117 3,054,946
------------- -------------
COMMITMENTS AND CONTINGENCIES
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,296,237 $ 12,287,857
============= =============
See Notes to Consolidated Financial Statements.
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HOUSTON INDUSTRIES INCORPORATED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(THOUSANDS OF DOLLARS)
Six Months Ended
June 30,
------------------------------
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 181,083 $ 128,594
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . 262,887 258,858
Amortization of nuclear fuel . . . . . . . . . . . . . . . . . . . . . . . . 14,856 14,895
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,758) (13,479)
Investment tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,757) (9,728)
Allowance for other funds used during construction . . . . . . . . . . . . . 142 (2,182)
Contribution of Time Warner securities . . . . . . . . . . . . . . . . . . . 19,463
Fuel cost over/(under) recovery - net . . . . . . . . . . . . . . . . . . . . (18,031) (89,988)
Changes in other assets and liabilities:
Accounts receivable - net . . . . . . . . . . . . . . . . . . . . . . . . 28,962 4,317
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,074 5,551
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,995) (4,618)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,561) 30,650
Interest and taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . (43,493) (47,326)
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . (24,666) (1,396)
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,242 1,450
---------- ----------
Net cash provided by operating activities . . . . . . . . . . . . . . 416,448 275,598
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Electric capital and nuclear fuel expenditures
(including allowance for borrowed funds used
during construction) . . . . . . . . . . . . . . . . . . . . . . . . . . . . (93,558) (153,079)
Non-regulated electric power project expenditures and
advances (including capitalized interest) . . . . . . . . . . . . . . . . . . (211,609) (438,563)
Sale of Time Warner securities . . . . . . . . . . . . . . . . . . . . . . . . . 25,043
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,082) (22,529)
---------- ----------
Net cash used in investing activities . . . . . . . . . . . . . . . . (285,206) (614,171)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of HL&P obligated mandatorily
redeemable securities of subsidiary trusts holding
solely subordinated debentures of HL&P . . . . . . . . . . . . . . . . . . . 340,785
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . (27,156)
Payment of matured bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . (190,000) (150,000)
Proceeds from issuance of pollution control revenue
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,739
Redemption of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . (153,628) (51,400)
Payment of common stock dividends . . . . . . . . . . . . . . . . . . . . . . . (175,235) (186,093)
Increase/(Decrease)in notes payable - net . . . . . . . . . . . . . . . . . . . 120,282 825,836
Extinguishment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . (190,338) (85,263)
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,118 6,020
---------- ----------
Net cash provided by/(used in) financing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (130,277) 331,944
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . 965 (6,629)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . 8,001 11,779
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . $ 8,966 $ 5,150
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- ------------------------------------------------
Cash Payments:
Interest (net of amounts capitalized) . . . . . . . . . . . . . . . . . . . . $ 178,378 $ 150,742
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,994 56,299
See Notes to Consolidated Financial Statements.
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HOUSTON INDUSTRIES INCORPORATED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
(THOUSANDS OF DOLLARS)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Balance at Beginning of Period . . . . . . . . . . . . . $1,969,454 $1,843,723 $1,997,490 $1,953,672
Net Income for the Period . . . . . . . . . . . . . . . . 121,463 145,334 181,083 128,594
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 2,090,917 1,989,057 2,178,573 2,082,266
Common Stock Dividends . . . . . . . . . . . . . . . . . (87,723) (92,884) (175,379) (186,093)
---------- ---------- ---------- ----------
Balance at End of Period . . . . . . . . . . . . . . . . $2,003,194 $1,896,173 $2,003,194 $1,896,173
========== ========== ========== ==========
See Notes to Consolidated Financial Statements.
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HOUSTON LIGHTING & POWER COMPANY
STATEMENTS OF INCOME
(THOUSANDS OF DOLLARS)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ----------------------
1997 1996 1997 1996
----------- ------------ ----------- -----------
OPERATING REVENUES . . . . . . . . . . . . . . . . . . $ 1,043,020 $ 1,099,971 $ 1,899,554 $ 1,911,936
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 247,033 300,666 466,362 498,288
Purchased power . . . . . . . . . . . . . . . . . . 78,632 74,137 179,624 152,316
Operation . . . . . . . . . . . . . . . . . . . . . 202,183 160,739 329,566 300,511
Maintenance . . . . . . . . . . . . . . . . . . . . 58,640 76,627 114,890 130,303
Depreciation and amortization . . . . . . . . . . . 130,732 129,377 260,982 257,811
Income taxes . . . . . . . . . . . . . . . . . . . . 72,899 82,242 106,222 114,305
Other taxes . . . . . . . . . . . . . . . . . . . . 58,608 65,303 121,420 127,868
----------- ----------- ----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . 848,727 889,091 1,579,066 1,581,402
----------- ----------- ----------- -----------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . 194,293 210,880 320,488 330,534
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Litigation settlements (net of tax) . . . . . . . . (61,750)
Allowance for other funds used
during construction . . . . . . . . . . . . . . . 585 1,051 (142) 2,182
Other - net . . . . . . . . . . . . . . . . . . . . (3,702) (2,650) (7,843) (6,010)
---------- ----------- ----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . (3,117) (1,599) (7,985) (65,578)
---------- ----------- ----------- -----------
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . 191,176 209,281 312,503 264,956
----------- ----------- ----------- -----------
INTEREST AND OTHER CHARGES:
Interest on long-term debt . . . . . . . . . . . . . 50,075 54,953 102,608 112,458
Other interest . . . . . . . . . . . . . . . . . . . 2,462 5,360 4,674 7,770
Distributions on trust securities . . . . . . . . . 7,155 11,673
Allowance for borrowed funds used
during construction . . . . . . . . . . . . . . . (745) (672) (1,845) (1,357)
---------- ----------- ----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . 58,947 59,641 117,110 118,871
----------- ----------- ----------- -----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . 132,229 149,640 195,393 146,085
DIVIDENDS ON PREFERRED STOCK . . . . . . . . . . . . . 97 5,313 2,222 11,945
----------- ----------- ----------- -----------
INCOME AFTER PREFERRED DIVIDENDS . . . . . . . . . . . $ 132,132 $ 144,327 $ 193,171 $ 134,140
=========== =========== =========== ===========
See Notes to Financial Statements.
-8-
9
HOUSTON LIGHTING & POWER COMPANY
BALANCE SHEETS
(THOUSANDS OF DOLLARS)
ASSETS
June 30, December 31,
1997 1996
------------- -------------
PROPERTY, PLANT AND EQUIPMENT - AT COST:
Electric plant in service . . . . . . . . . . . . . . . . . . . . . . . . $ 12,524,704 $ 12,387,375
Construction work in progress . . . . . . . . . . . . . . . . . . . . . . 173,555 251,497
Nuclear fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251,964 241,001
Plant held for future use . . . . . . . . . . . . . . . . . . . . . . . . 48,631 48,631
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,998,854 12,928,504
Less accumulated depreciation and amortization . . . . . . . . . . . . . 4,474,500 4,252,745
------------- -------------
Property, plant and equipment - net . . . . . . . . . . . . . . . . 8,524,354 8,675,759
------------- -------------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . 443 643
Special deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10
Accounts receivable:
Affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . 1,398 1,493
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,808 16,996
Accrued unbilled revenues . . . . . . . . . . . . . . . . . . . . . . . . 56,342 77,853
Inventory:
Fuel stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,846 61,795
Materials and supplies, at average cost . . . . . . . . . . . . . . . 123,681 130,281
Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,178 10,770
------------- -------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 257,712 299,841
------------- -------------
OTHER ASSETS:
Deferred plant costs - net . . . . . . . . . . . . . . . . . . . . . . . 574,461 587,352
Regulatory tax asset - net . . . . . . . . . . . . . . . . . . . . . . . 358,474 362,310
Deferred debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285,079 270,381
Unamortized debt expense and premium on
reacquired debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,323 152,524
Recoverable project costs - net . . . . . . . . . . . . . . . . . . . . . 143,120 163,630
Fuel-related debits . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,466 84,435
------------- -------------
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . 1,628,923 1,620,632
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,410,989 $ 10,596,232
============= =============
See Notes to Financial Statements.
-9-
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HOUSTON LIGHTING & POWER COMPANY
BALANCE SHEETS
(THOUSANDS OF DOLLARS)
CAPITALIZATION AND LIABILITIES
June 30, December 31,
1997 1996
-------------- -------------
CAPITALIZATION:
Common stock equity:
Common stock, class A; no par value . . . . . . . . . . . . . . . . . . . $ 1,524,949 $ 1,524,949
Common stock, class B; no par value . . . . . . . . . . . . . . . . . . . 150,978 150,978
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,256,612 2,227,941
-------------- -------------
Total common stock equity . . . . . . . . . . . . . . . . . . . . . 3,932,539 3,903,868
-------------- -------------
Cumulative preferred stock, not subject to
mandatory redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,740 135,179
-------------- -------------
HL&P obligated mandatorily redeemable securities of
subsidiary trusts holding solely subordinated
debentures of HL&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,785
-------------- -------------
Long-Term Debt:
First mortgage bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,495,078 2,670,041
Pollution control revenue bonds . . . . . . . . . . . . . . . . . . . . . 118,000 5,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,057 1,511
-------------- -------------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . 2,615,135 2,676,552
-------------- -------------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . 6,898,199 6,715,599
-------------- -------------
CURRENT LIABILITIES:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157,182 234,665
Notes payable to affiliated companies . . . . . . . . . . . . . . . . . . . . 19,600
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,549 142,439
Accounts payable to affiliated companies . . . . . . . . . . . . . . . . . . 8,324 5,744
Taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,031 196,444
Interest accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,197 60,234
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,808 53,633
Current portion of long-term debt and
preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,129 254,463
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,081 85,274
-------------- -------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 653,301 1,052,496
-------------- -------------
DEFERRED CREDITS:
Accumulated deferred federal income taxes . . . . . . . . . . . . . . . . . . 2,133,117 2,124,567
Unamortized investment tax credit . . . . . . . . . . . . . . . . . . . . . . 363,992 373,749
Fuel-related credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,390 74,639
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271,990 255,182
-------------- -------------
Total deferred credits . . . . . . . . . . . . . . . . . . . . . . . 2,859,489 2,828,137
-------------- -------------
COMMITMENTS AND CONTINGENCIES
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,410,989 $ 10,596,232
============== =============
See Notes to Financial Statements.
-10-
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HOUSTON LIGHTING & POWER COMPANY
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(THOUSANDS OF DOLLARS)
Six Months Ended
June 30,
---------------------------------
1997 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 195,393 $ 146,085
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 260,982 257,811
Amortization of nuclear fuel . . . . . . . . . . . . . . . . . . . . . 14,856 14,895
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . 8,549 7,550
Investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . (9,757) (9,728)
Allowance for other funds used during
construction . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 (2,182)
Fuel cost over/(under) recovery - net . . . . . . . . . . . . . . . . (18,031) (89,988)
Changes in other assets and liabilities:
Accounts receivable - net . . . . . . . . . . . . . . . . . . . . . 26,794 3,661
Material and supplies . . . . . . . . . . . . . . . . . . . . . . . 17,125 12,297
Fuel stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,949 (6,496)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . (17,310) 39,377
Interest and taxes accrued . . . . . . . . . . . . . . . . . . . . (51,450) (64,075)
Other current liabilities . . . . . . . . . . . . . . . . . . . . . (17,042) (1,405)
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,806 (11,124)
------------ ------------
Net cash provided by operating activities . . . . . . . . . . . 440,006 296,678
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital and nuclear fuel expenditures
(including allowance for borrowed funds
used during construction) . . . . . . . . . . . . . . . . . . . . . . (93,558) (153,079)
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,908) (4,498)
------------ ------------
Net cash used in investing activities . . . . . . . . . . . . . (96,466) (157,577)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of HL&P obligated mandatorily
redeemable securities of subsidiary trust holding
solely subordinated debentures of HL&P . . . . . . . . . . . . . . . . 340,785
Payment of matured bonds . . . . . . . . . . . . . . . . . . . . . . . . (190,000) (150,000)
Proceeds from issuance of pollution control
revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,739
Payment of dividends . . . . . . . . . . . . . . . . . . . . . . . . . . (169,699) (177,771)
Increase/(decrease) in notes payable . . . . . . . . . . . . . . . . . . . (77,483) 245,725
Redemption of preferred stock . . . . . . . . . . . . . . . . . . . . . (153,628) (51,400)
Extinguishment of long-term debt . . . . . . . . . . . . . . . . . . . . (190,338) (85,263)
Decrease in notes payable to affiliated company . . . . . . . . . . . . . (19,600)
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484 4,406
------------ ------------
Net cash used in financing activities . . . . . . . . . . . . . (343,740) (214,303)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . (200) (75,202)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . 643 75,851
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . $ 443 $ 649
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- ------------------------------------------------
Cash Payments:
Interest (net of amounts capitalized) . . . . . . . . . . . . . . . . $ 129,836 $ 120,487
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,026 68,088
See Notes to Financial Statements.
-11-
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HOUSTON LIGHTING & POWER COMPANY
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- ------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Balance at Beginning of
Period . . . . . . . . . . . . . . . $ 2,206,730 $ 2,057,649 $ 2,227,941 $ 2,150,086
Net Income for the Period . . . . . . . . 132,229 149,640 195,393 146,085
----------- ----------- ----------- -----------
Total . . . . . . . . . . . . . . . 2,338,959 2,207,289 2,423,334 2,296,171
----------- ----------- ----------- -----------
Deductions - Cash Dividends:
Preferred . . . . . . . . . . . . . 97 5,313 2,222 11,945
Common . . . . . . . . . . . . . . . 82,250 82,250 164,500 164,500
----------- ----------- ----------- -----------
Total . . . . . . . . . . . . . 82,347 87,563 166,722 176,445
----------- ----------- ----------- -----------
Balance at End of Period . . . . . . . . $ 2,256,612 $ 2,119,726 $ 2,256,612 $ 2,119,726
=========== =========== =========== ===========
See Notes to Financial Statements.
-12-
13
HOUSTON INDUSTRIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AND
HOUSTON LIGHTING & POWER COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) GENERAL
The interim financial statements and notes (Interim Financial
Statements) in this Form 10-Q (Form 10-Q) are unaudited and
condensed. Certain notes and other information in the Annual
Report on Form 10-K (File Nos. 1-7629 and 1-3187) for the year
ended December 31, 1996 (Form 10-K), of Houston Industries
Incorporated (Company) and Houston Lighting & Power Company
(HL&P) have been omitted pursuant to Rule 10-01 of Regulation
S-X under the Securities Exchange Act of 1934. The
information in the Interim Financial Statements should be read
in combination with the Form 10-K and the Quarterly Report on
Form 10-Q of the Company and HL&P for the quarter ended March
31, 1997 (First Quarter 10-Q).
The following notes to the financial statements in the Form
10-K, as updated by the notes contained in this Form 10-Q and
the First Quarter 10-Q, are incorporated herein by reference:
Note 1(b) (System of Accounts and Effects of Regulation), Note
1(n) (Nature of Operations), Note 1(o) (Use of Estimates),
Note 1(p) (Long-Lived Assets), Note 2 (Jointly-Owned Nuclear
Plant), Note 3 (Rate Matters), Note 11 (Commitments and
Contingencies) and Note 16 (NorAm Merger).
(2) NORAM MERGER
On August 6, 1997, the Company merged with and into HL&P,
which was renamed "Houston Industries Incorporated" (Houston),
and NorAm Energy Corp. (NorAm) merged with and into a
subsidiary of the Company, HI Merger, Inc., which was renamed
"NorAm Energy Corp." (New NorAm), and became a wholly owned
subsidiary of Houston. Effective upon the mergers
(collectively, the Merger), each outstanding share of common
stock of the Company was converted into one share of Houston
common stock (including associated preference stock purchase
rights), and all treasury shares of the Company and all shares
of Class A and Class B common stock of HL&P were canceled.
Under the terms of the Merger, NorAm common stockholders
received approximately $1.4 billion in cash and approximately
47.8 million shares of Houston common stock. After giving
effect to the Merger, the number of shares of common stock of
Houston outstanding as of August 6, 1997, was 294,637,686
(including 12,669,031 ESOP shares not deemed outstanding for
financial statement purposes).
Houston, the surviving corporation of the Merger, has assumed
all obligations of the Company and will continue to conduct
HL&P's electric utility business under HL&P's name. NorAm's
existing debentures and convertible securities will remain
outstanding
-13-
14
as the securities of New NorAm, a wholly owned subsidiary of
Houston, and will not be assumed by Houston except with
respect to conversion of certain convertible debt securities
into Houston common stock. New NorAm will continue to be a
separate reporting company under the Securities Exchange Act
of 1934.
Unless otherwise stated, the information in this Form 10-Q
relates solely to the Company and HL&P without giving effect
to the Merger. The Merger will be accounted for in the third
quarter of 1997 by the purchase method of accounting for
business combinations. For additional information regarding
the Merger, reference is made to the Form 8-K dated August 6,
1997, and filed by the Company and HL&P with the Securities
and Exchange Commission (SEC) on August 8, 1997.
(3) CAPITAL STOCK
Company. As of June 30, 1997 and December 31, 1996, the
Company had 400,000,000 authorized shares of common stock, of
which 234,128,473 shares were outstanding at June 30, 1997,
and 233,335,481 shares were outstanding at December 31, 1996.
Outstanding common shares excluded (i) shares pledged to
secure a loan to the Company's Employee Stock Ownership Plan
(12,669,031 and 13,370,939 at June 30, 1997 and December 31,
1996, respectively) and (ii) treasury shares (16,042,027 at
June 30, 1997 and December 31, 1996).
The Company calculates earnings per common share data by
dividing net income by the weighted average number of common
shares outstanding during the relevant period. For
information regarding the adoption of Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share"
(Dual Presentation of Basic and Diluted Earnings per Share
Calculations for Financial Statements) with respect to periods
ending after December 15, 1997, see Note 5 to the First
Quarter Form 10-Q. The Company's current earnings per share
calculation conforms to basic earnings per share. Dilutive
earnings per share are not expected to be materially different
from basic earnings per share.
HL&P. At June 30, 1997, the Company owned all shares of
HL&P's Class A voting common stock, and Houston Industries
(Delaware) Incorporated, a wholly owned subsidiary of the
Company, owned all shares of HL&P's Class B non-voting common
stock. HL&P earnings per share data are omitted because at
June 30, 1997 and December 31, 1996, all shares of HL&P common
stock were owned by the Company and its affiliates.
At June 30, 1997 and December 31, 1996, HL&P had 10,000,000
authorized shares of preferred stock, of which 97,397 and
1,604,397 shares were outstanding at such dates.
In April 1997, HL&P redeemed all remaining 257,000 shares of
its $9.375 cumulative preferred stock pursuant to mandatory
sinking fund requirements at a cost of $25.7 million, plus
accrued dividends. For information regarding the redemption
of 1,250,000 shares of HL&P's cumulative preferred stock in
February 1997, see Note 7 to the First Quarter 10-Q.
-14-
15
(4) LONG-TERM DEBT
In June 1997, HL&P purchased $57.6 million aggregate principal
amount of its 9.15% First Mortgage Bonds due March 15, 2021,
for a total purchase price of $69.6 million, plus accrued
interest.
In April 1997, HIE Cayman, Inc., a subsidiary of Houston
Industries Energy, Inc. (HI Energy), borrowed an additional
$162.5 million under a $167.5 million five-year term loan
facility. The proceeds of the loan, net of a $17.5 million
debt reserve account established for the benefit of the
lenders, were used to refinance a portion of the acquisition
costs of Light-Servicos de Eletricidade S.A. (Light). The
$17.5 million debt reserve is included in deferred debits on
the Company's Consolidated Balance Sheets. The loan, which is
non-recourse to the Company and HL&P, restricts payments of
dividends by HIE Cayman, Inc. if Light fails to meet certain
financial covenants. The loan is secured by, among other
things, a pledge of the shares of Light. HI Energy acquired
an 11.35 percent interest in Light in May 1996 for $392
million.
For information regarding (i) the issuance, on behalf of HL&P,
of $118 million aggregate principal amount of pollution
control revenue bonds in January 1997, (ii) the redemption of
$118 million aggregate principal amount of pollution control
revenue bonds in February 1997 and (iii) HL&P's repayment at
maturity of $190 million aggregate principal amount of first
mortgage bonds in the first quarter of 1997, see Note 6 to the
First Quarter 10-Q.
(5) HL&P OBLIGATED MANDATORILY REDEEMABLE SECURITIES OF SUBSIDIARY
TRUSTS HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES OF HL&P
For information regarding the issuance of (i) $250 million of
preferred securities and (ii) $100 million of capital
securities by two HL&P Delaware statutory business trusts
(Trusts), see Note 7 to the First Quarter 10-Q. The sole
assets of the Trusts are $350 million aggregate principal
amount of HL&P subordinated debentures having interest rates
and maturity dates corresponding to the Trust securities.
(6) DEPRECIATION
The Company and HL&P calculate depreciation using the
straight-line method. The Company's depreciation expense for
the second quarter of 1997 and the six months ended June 30,
1997 was $91 million and $182 million, respectively, compared
to $89 million and $178 million for the same periods in 1996.
HL&P's depreciation expense for the second quarter and first
six months of 1997 was $90 million and $180 million,
respectively, compared to $89 million and $177 million for the
same periods in 1996.
(7) RATE CASE MATTERS AND OTHER PROCEEDINGS
For information regarding the appeal of Docket No. 6668, an
inquiry into the prudence of the planning and construction of
the South Texas Project Electric Generating Station (South
Texas Project), see Note 3(b) to the Form 10-K.
-15-
16
In July 1997, the one appellant remaining in the appeal of
Docket No. 6668 voluntarily dismissed its appeal. Based on
this action, HL&P is seeking entry of a judgment affirming the
Public Utility Commission's of Texas (Utility Commission) order
in Docket No. 6668. If the motions are granted, all appeals of
HL&P's prior rate cases will be concluded.
Reference is made to Note 11(c) to the Form 10-K and Note 8 to
the First Quarter 10-Q for information regarding a lawsuit
against HL&P for recovery of allegedly unpaid franchise fees.
In June 1997, the Texas Supreme Court ruled that it did not
have jurisdiction, at this stage in the proceedings, to review
the trial court's certification of the case as a class action.
The case is scheduled for trial in April 1998 before the
District Court of Harris County, Texas. For the reasons set
forth in Note 11(c) to the Form 10-K, the Company regards the
case as spurious and is aggressively contesting the lawsuit.
(8) HI ENERGY
Colombian Electric Utility. In June 1997, a consortium of
investors (Consortium) comprised of affiliates and
subsidiaries of HI Energy and La Electricidad de Caracas SACA
(EDC) purchased approximately 56.7 percent (Controlling
Shares) of the shares of Empresa de Energia del Pacifico
S.A.E.S.P. (EPSA), a Colombian electric utility company.
EPSA operates generation, transmission and distribution
facilities in 37 municipalities in the Valle del Cauca region
of southwestern Colombia.
The purchase price for the Controlling Shares was
approximately $496 million. The purchase price was financed
through capital contributions from HI Energy and EDC of
approximately $150 million each and $196 million in bank
borrowings. The bank borrowings were made under a three-year
credit facility entered into by a special purpose holding
company that is jointly owned by EDC and HI Energy.
Borrowings under the facility, which are non-recourse to the
Company and HL&P (with limited recourse to HI Energy), are
secured by, among other things, a pledge of the stock of the
special purpose holding company and a pledge of the
Controlling Shares.
The Company has accounted for this transaction under purchase
accounting and has recorded its aggregate 28.35 percent
investment in EPSA's operations since June 1997, using the
equity method. The effect of EPSA's income on the Company's
net income is immaterial for the second quarter of 1997 and
the six months ended June 30, 1997.
-16-
17
Argentine Holding Company. In May 1997, HI Energy increased
its indirect ownership interest in Empresa Distribuidora de La
Plata S.A. (EDELAP), an Argentine electric utility, from 48
percent to 63 percent. The purchase price of the additional
interest was approximately $28 million. The Company has
recorded its investment in EDELAP using the equity method
because of the significance of the participating rights held
by a minority shareholder.
(9) TIME WARNER INVESTMENT
As part of the consideration for the sale of the Company's
cable television business in 1995, the Company received 1
million shares of Time Warner Inc. (Time Warner) common stock
and 11 million shares of non-publicly traded Series D
Convertible Preferred Stock of Time Warner (Time Warner
Preferred Stock). The Time Warner Preferred Stock is
currently convertible by the Company into, and after July 1999
is exchangeable by Time Warner for, approximately 22.9 million
shares of Time Warner common stock. For a description of the
Time Warner Preferred Stock, see Notes 1(j) and 13 to the Form
10-K.
In the second quarter of 1997, the Company sold in open market
transactions 550,000 shares of Time Warner common stock for
approximately $25 million (representing an average sales price
of $45.49 per share, net of fees and commissions) and made an
irrevocable contribution of the remaining 450,000 shares of
its Time Warner common stock (having a market value of $21.9
million) to Houston Industries Incorporated Foundation, a
charitable foundation, not included in the Company's
consolidated results, formed to fund certain charitable
activities previously funded by the Company. The
contribution of the stock to the charitable foundation is
reflected on the Company's Statements of Consolidated Income
in other operating expenses.
For information regarding the monetization of the Company's
investment in Time Warner Preferred Stock in the third quarter
of 1997, see Note 10(a) to the Interim Financial Statements,
below.
(10) SUBSEQUENT EVENTS
(a) ACES SECURITIES. In July 1997, the Company completed a public
offering of 22,909,040 of its unsecured 7% Automatic Common
Exchange Securities due July 1, 2000 (ACES Securities), having
a face amount of $45.9375 per security. The Company used the
net proceeds of the offering (approximately $1.021 billion)
for general corporate purposes, including the retirement of an
equivalent amount of the Company's outstanding commercial
paper.
At maturity, the principal amount of the ACES Securities will
be mandatorily exchangeable by the Company into either (i) a
number of shares of Time Warner common stock determined based
on an exchange rate or (ii) cash with equal value. Subject to
adjustments that may result from certain dilution events, the
exchange rate for each ACES Security is determined as follows:
(i) 0.8264 shares of Time Warner common stock if the price of
Time Warner common stock at maturity (Maturity Price) is at
least $55.5844 per share, (ii) a fractional share of Time
Warner common stock having a value equal to $45.9375 if the
Maturity Price is less than $55.5844 but greater than $45.9375
and (iii) one share of Time Warner common stock if the
Maturity Price
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18
is not more than $45.9375. Prior to maturity, the Company has
the option of redeeming the ACES Securities if changes in
federal tax regulations require (i) recognition of a taxable
gain on the Company's Time Warner Preferred Stock and (ii) the
Company could defer such gain by redeeming the ACES
Securities. The redemption price is 105 percent of the
closing sales price of the ACES Securities as determined over
a period prior to the redemption notice. The redemption price
may be paid in cash or shares of Time Warner common stock or a
combination of the two.
The Company accounts for its investment in Time Warner
Preferred Stock under the cost method. If, prior to the
conversion of the Time Warner Preferred Stock into Time Warner
common stock, the market price of Time Warner common stock
increases above $55.5844, the Company would record in Other
Income (Expense) an accounting loss equal to (i) the aggregate
amount of such increase as applicable to all ACES securities
multiplied by (ii) 0.8264. In accordance with generally
accepted accounting principles, this accounting loss, which
would reflect the unrealized increase in the Company's
indebtedness with respect to the ACES Securities, would not,
under current accounting practices, be offset by the increase
in the market price of the Time Warner common stock into which
the Time Warner Preferred Stock is convertible. Upon
conversion of the Time Warner Preferred Stock (anticipated to
occur in July 1999), the Company would reverse any accounting
losses previously recognized on the income statement and would
begin recording unrealized net changes in the market prices of
the Time Warner common stock and the ACES Securities as a
component of common stock equity.
(b) NORAM MERGER. For information regarding the Merger, including
financing of the Merger, see Note 2 to the Interim Financial
Statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and
Capital Resources--Company--Sources of Capital Resources and
Liquidity--The Merger" in Item 2 of this Form 10-Q.
(11) INTERIM PERIOD RESULTS: RECLASSIFICATIONS
The results of interim periods are not necessarily indicative
of results expected for the year due to the seasonal nature of
HL&P's business. In the opinion of management, the interim
information reflects all adjustments (consisting only of
normal recurring adjustments) necessary for a full
presentation of the results for the interim periods. Certain
amounts from the previous year have been reclassified to
conform to the 1996 presentation of financial statements.
Such reclassifications do not affect earnings.
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19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis should be read in combination
with Management's Discussion and Analysis of Financial Condition and Results of
Operations in Item 7 of the Form 10-K, the financial statements and notes
contained in Item 8 of the Form 10-K and the Interim Financial Statements.
Statements contained in this Form 10-Q that are not historical facts
are forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995. Such statements are expectations as to future economic
performance and are not statements of fact. Actual results may differ
materially from those projected in these statements. Important factors that
could cause future results to differ include the effects of competition,
legislative and regulatory changes, fluctuations in the weather and changes in
the economy as well as other factors discussed in this and other filings by the
Company and HL&P with the SEC. When used in the Company's and HL&P's documents
or oral presentations, the words "anticipate," "estimate," "expect,"
"objective," "projection," "forecast," "goal" or similar words are intended to
identify forward-looking statements. The sections of Management's Discussion
and Analysis of Financial Condition and Results of Operations captioned "The
Merger," "Results of Operations" and "Recent Developments" contain or
incorporate forward-looking statements.
THE MERGER
On August 6, 1997, the Company merged with and into HL&P, which was
renamed "Houston Industries Incorporated," and NorAm merged with and into a
subsidiary of Houston and became a wholly owned subsidiary of Houston.
Consideration for the purchase of NorAm shares was approximately $1.4 billion
in cash and approximately 47.8 million shares of Houston common stock.
Unless otherwise stated, the information in this Management's
Discussion and Analysis of Financial Condition and Results of Operations
relates solely to the Company and HL&P without giving effect to the Merger.
For additional information regarding the Merger, see the Company and
HL&P's Combined Report on Form 8-K dated August 6, 1997, Note 2 to the Interim
Financial Statements, "Liquidity and Capital Resources--Company--Sources of
Capital Resources and Liquidity--The Merger" below, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--The
Merger" in the Form 10-K and Note 16 to the Financial Statements contained in
the Form 10-K.
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20
RESULTS OF OPERATIONS
COMPANY
A summary of selected financial data for the Company and its
subsidiaries is set forth below:
Three Months Ended
June 30, Percent
1997 1996 Change
------------ ------------ --------
(Thousands of Dollars)
Revenues . . . . . . . . . . . . . . . . . . . . . $1,064,448 $1,113,763 (4)
Operating Expenses . . . . . . . . . . . . . . . . 817,276 827,483 (1)
Operating Income . . . . . . . . . . . . . . . . . 247,172 286,280 (14)
Other Income (Expense) . . . . . . . . . . . . . . 10,331 12,526 (18)
Interest and Other Charges . . . . . . . . . . . . 85,482 82,973 3
Income Taxes . . . . . . . . . . . . . . . . . . . 50,558 70,499 (28)
Net Income . . . . . . . . . . . . . . . . . . . 121,463 145,334 (16)
Six Months Ended
June 30, Percent
1997 1996 Change
------------ ------------ --------
(Thousands of Dollars)
Revenues . . . . . . . . . . . . . . . . . . . . . $1,942,549 $1,938,184 -
Operating Expenses . . . . . . . . . . . . . . . . 1,539,161 1,514,437 2
Operating Income . . . . . . . . . . . . . . . . . 403,388 423,747 (5)
Other Income (Expense) . . . . . . . . . . . . . . 18,972 (72,675) -
Interest and Other Charges . . . . . . . . . . . . 170,237 161,889 5
Income Taxes . . . . . . . . . . . . . . . . . . . 71,040 60,589 17
Net Income . . . . . . . . . . . . . . . . . . . 181,083 128,594 41
The Company had consolidated earnings of $121 million or $.52 per
share for the second quarter of 1997 compared to consolidated earnings of $145
million or $.58 per share for the second quarter of 1996. Factors contributing
to the decrease in 1997 second quarter earnings were reduced sales at HL&P, the
Company's principal subsidiary, due to cooler weather, increased interest
expense resulting from higher short term debt levels at the Company and the
costs associated with the irrevocable contribution of 450,000 shares of Time
Warner common stock (having a market value of $21.9 million and a book value of
$19.5 million) to a charitable foundation recently established by the Company.
Partially offsetting these effects were improved results at HI Energy and
reduced operations and maintenance expense at HL&P.
The Company's consolidated earnings for the first six months of 1997
were $181 million or $.77 per share compared to $129 million or $.52 per share
for the same period in 1996. However, earnings for the first six months of
1996 would have been $196 million or $.79 per share excluding a one-time,
after-tax charge of $62 million in connection with the settlement of litigation
claims relating to the South Texas Project and a $5 million after-tax charge
associated with an investment in two tire-to-energy plants in Illinois. The
decrease in earnings for the first six months of 1997
- 20 -
21
compared to earnings excluding one-time items recorded in 1996 was due to the
same factors that affected the second quarter comparisons.
HL&P
A summary of selected financial data for HL&P is set forth below:
Three Months Ended
June 30, Percent
1997 1996 Change
--------------- ------------- --------
(Thousands of Dollars)
Total Revenues . . . . . . . . . . . . . . . . . . $1,043,020 $1,099,971 (5)
Operating Expenses (1) . . . . . . . . . . . . . . 848,727 889,091 (5)
Operating Income (1) . . . . . . . . . . . . . . . 194,293 210,880 (8)
Other Income (Expense) (1) . . . . . . . . . . . . (3,117) (1,599) -
Interest Charges . . . . . . . . . . . . . . . . . 58,947 59,641 (1)
Income (Loss) After Preferred Dividends . . . . . 132,132 144,327 (8)
Six Months Ended
June 30, Percent
1997 1996 Change
--------------- ------------- --------
(Thousands of Dollars)
Total Revenues . . . . . . . . . . . . . . . . . . $1,899,554 $1,911,936 (1)
Operating Expenses (1) . . . . . . . . . . . . . . 1,579,066 1,581,402 -
Operating Income (1) . . . . . . . . . . . . . . . 320,488 330,534 (3)
Other Income (Expense) (1) . . . . . . . . . . . . (7,985) (65,578) 88
Interest Charges . . . . . . . . . . . . . . . . . 117,110 118,871 (1)
Income (Loss) After Preferred Dividends . . . . . 193,171 134,140 44
- -----------------
(1) Includes income taxes
HL&P's income after preferred dividends decreased to $132 million in
the second quarter of 1997 from $144 million in the same period in 1996.
Weather during the second quarter of 1997 was significantly cooler than during
the same period of 1996. The difference in weather conditions contributed to a
3 percent decrease in kilowatt-hour (KWH) sales and a 7 percent decrease in
base revenues compared to the same period last year despite steady customer
growth. Partially offsetting these effects were reduced operations and
maintenance expense.
HL&P's income after preferred dividends for the first six months of
1997 was $193 million compared to $134 million for the same period in 1996,
inclusive of the $62 million after-tax charge recorded in the first quarter of
1996, as discussed above. Excluding the charge, income after preferred
dividends would have been $196 million for the first six months of 1996. For
the first six months of 1997, cooler weather offset customer growth resulting
in relatively flat KWH sales compared to the same period in 1996.
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22
TOTAL REVENUES
HL&P's total revenues for the second quarter and first six months of
1997 decreased 5 percent and 1 percent, respectively, compared to the same
periods in 1996. The following table summarizes the increase and decrease in
the various components of HL&P's total revenues:
Increase/(Decrease)
--------------------------------------------------------
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1997
--------------------------- -----------------------
(Thousands of Dollars)
Base Revenue (1) $(51,340) $(51,127)
Transmission Revenue 42,914 42,914
Reconcilable Fuel Revenue (2) (48,525) (4,169)
(1) Includes electric sales (excluding fuel), miscellaneous
revenues (excluding transmission revenue), certain
non-reconcilable fuel and certain purchased power related
revenues.
(2) Includes revenues collected through a fuel factor and
surcharge net of adjustment for over/under recovery of fuel.
Base Revenues. HL&P's base revenues decreased $51 million in each of
the second quarter and first six months of 1997 (7 percent and 4 percent,
respectively) primarily as a result of cooler weather. Total KWH sales during
the second quarter of 1997 decreased 3 percent, including a 17 percent decrease
in residential KWH sales offset by a 4 and 3 percent increase in commercial and
industrial KWH sales, respectively.
Transmission Revenues. In June 1997, HL&P recorded $43 million in
revenues (offset by $44 million in expenses) associated with wholesale
transmission services during the first six months of 1997 as a result of new
wholesale transmission tariffs within the Electric Reliability Council of Texas
(ERCOT). For additional information, see "--Operating Expenses--Operation and
Maintenance Expenses," below and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Certain Factors Affecting Future
Earnings of the Company and HL&P-- Competition--Competition in Wholesale
Market" in the Form 10-K.
Reconcilable Fuel Revenues. Reconcilable fuel revenue decreased $49
million (14 percent) in the second quarter of 1997 compared to the same period
in 1996 due to lower sales. Reconcilable fuel revenue for the first six months
of 1997 was relatively flat compared to the same period in 1996.
The Utility Commission permits recovery of certain fuel and purchased
power costs through a fixed fuel factor included in electric rates. The fixed
fuel factor is established during either a utility's general rate proceeding or
its fuel factor proceeding and is generally effective for a minimum of six
months. Since reconcilable fuel revenues are adjusted monthly to equal
expenses, these items have no effect on earnings unless fuel costs are
subsequently determined by the Utility Commission not to be recoverable. The
adjusted over/under recovery of fuel costs is recorded on HL&P's Balance Sheets
as fuel-related credits or fuel-related
- 22 -
23
debits. For information regarding the recovery of fuel costs, see "Business of
HL&P--Fuel --Recovery of Fuel Costs" in Item 1 of the Form 10-K.
At June 30, 1997, HL&P's cumulative under-recovery of fuel costs was
$102 million. In January 1997, HL&P implemented a $70 million temporary fuel
surcharge, inclusive of interest through June 30, 1997. The fuel surcharge was
intended to reduce HL&P's cumulative fuel under-recovery balance as of August
31, 1996. In July 1997, HL&P implemented an additional $62 million temporary
fuel surcharge, inclusive of interest, to be effective during the six-month
period ending December 31, 1997. The fuel surcharge was intended to reduce
HL&P's cumulative under-recovery of fuel expenses for the period between
September 1996 and February 1997. Neither fuel surcharge has an effect on
earnings.
OPERATING EXPENSES
Fuel Expense. HL&P's fuel expense for the second quarter and the
first six months of 1997 decreased $54 million and $32 million, respectively,
compared to the same periods in 1996. The decrease is primarily the result of
a decrease in KWH sales due to cooler weather.
The average cost of fuel for the second quarter of 1997 was $1.73 per
million British Thermal Units (MMBtu) compared to $2.01 per MMBtu for the
second quarter of 1996, while the average cost of fuel for the first six months
of 1997 was $1.79 per MMBtu compared to $1.87 per MMBtu for the same period in
1996. The average unit cost of gas for the second quarter of 1997 was $2.22
per MMBtu compared to $2.28 per MMBtu for the second quarter of 1996, while the
average unit cost of gas for the first six months of 1997 was $2.55 per MMBtu
compared to $2.24 per MMBtu for the same period of 1996.
Purchased Power Expense. Purchased power expense for the second
quarter of 1997 increased $4 million compared to the second quarter of 1996.
Purchased power expenses for the first six months of 1997 increased $27 million
compared to the same period in 1996 due to increased energy purchases.
Operation and Maintenance Expense. Operations and maintenance expense
decreased 9 percent and 7 percent, respectively, for the second quarter and the
first six months of 1997, excluding $44 million due to the implementation of
new wholesale transmission tariffs within ERCOT. As discussed above, in June
1997, HL&P recorded $44 million of expense and $43 million of revenue
associated with wholesale transmission services during the first six months of
1997. These additional expenses do not reflect an increase in HL&P's cost of
providing transmission service, but only a change in the pricing and billing of
wholesale transmission services among providers. The decrease in maintenance
expense was primarily the result of the timing and scheduling of planned
outages.
Depreciation and amortization expense for all periods included (i) a
write down of HL&P's investment in the South Texas Project ($12.5 million for
the second quarter of 1997 and a total of $25 million for the six months ended
June 30, 1997) and (ii) a write down of HL&P's investment in lignite reserves
associated with a canceled generation project ($5.5 million for the second
quarter of 1997 and a total of $11 million for the six months period ended June
30, 1997). For additional information regarding these expenses, see Note 3(a)
to the Financial Statements included in the Form 10-K.
RECENT DEVELOPMENTS
On June 2, 1997, the Texas legislature adjourned without having
adopted or taken any formal action with respect to various proposals concerning
the restructuring of the Texas electric
- 23 -
24
utility industry, including proposals related to retail electric competition
and stranded cost recovery. At this time, the Company and HL&P cannot predict
what, if any, action the Texas legislature may take in the next legislative
session (scheduled to commence in 1999) with respect to any of these proposals
or the ultimate form in which such proposals may be adopted, if at all. The
Company and HL&P are also unable to predict what actions, if any, that the
Utility Commission may take in seeking to implement a restructuring of the
Texas electric utility industry prior to the next session of the Texas
legislature through the exercise of the Utility Commission's jurisdiction (or,
in some cases, appellate jurisdiction) over electric rates, including the
authority of the Utility Commission to initiate or settle rate cases.
For information on other developments, factors, and trends that may
have an impact on the Company's and HL&P's future earnings, reference is made
to Item 7 of the Form 10-K, "Management's Discussion and Analysis of
Financial Condition and Results of Operations--The Merger" and "--Certain
Factors Affecting Future Earnings of the Company and HL&P" and Item 2 of the
First Quarter 10-Q, "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Recent Developments."
LIQUIDITY AND CAPITAL RESOURCES
COMPANY
SOURCES OF CAPITAL RESOURCES AND LIQUIDITY
General. As of June 30, 1997, the Company had approximately $1.1
billion of commercial paper outstanding, supported by two bank credit
facilities aggregating $1.5 billion. As of June 30, 1997, HL&P had
approximately $157 million of commercial paper outstanding, supported by a bank
credit facility of $400 million. Rates paid by the Company and HL&P on
short-term borrowings during the second quarter of 1997 were generally lower
than the prime rate. Subsequent to the second quarter of 1997, the Company
terminated one of its credit facilities and reduced the other facility to $400
million following receipt of $1.0 billion from the issuance of the ACES
Securities. This facility was subsequently terminated upon the funding of the
$1.644 billion bank facility entered into in connection with the Merger, see
"--The Merger" below.
In the second quarter of 1997, the Company sold in open market
transactions 550,000 shares of Time Warner common stock for approximately $25
million and transferred the remaining 450,000 shares of its Time Warner common
stock (having a market value of $21.9 million) to Houston Industries
Incorporated Foundation, a charitable foundation. The Company's tax basis in
the shares contributed was $7 million. The Company was able to avoid paying
taxes on the gain by taking advantage of tax incentives for donating
appreciated stock. For information regarding this transaction, see Note 9 to
the Interim Financial Statements.
For information regarding a $167.5 million loan received by a
subsidiary of HI Energy in the second quarter of 1997 and the sources of funds
used in connection with HI Energy's additional investments in Argentina and
Colombia during the second quarter of 1997, see Notes 4 and 8 to the Interim
Financial Statements.
ACES Securities. In July 1997, the Company completed a public
offering of 22,909,040 of its 7% ACES Securities due July 1, 2000 with a face
amount per security of $45.9375. For additional information regarding the ACES
Securities, see Note 10(a) to the Interim Financial Statements.
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25
The Merger. In connection with the closing of the Merger, in August
1997 a limited partnership special purpose subsidiary (Borrower) of Houston
entered into a five-year, $1.644 billion revolving credit facility with a group
of commercial banks (Bank Facility) and established a commercial paper program
supported by the Bank Facility. On August 6, 1997, the Borrower sold
approximately $1.4 billion of commercial paper. The proceeds were used to
purchase newly issued shares of Series B Preference Stock of Houston
(Preference Stock). Houston used the proceeds from the sale of the Preference
Stock to pay the cash consideration for the Merger.
In connection with the Bank Facility, Houston also entered into a
support agreement pursuant to which it is obligated, subject to certain
limitations, to make cash contributions or advances to the Borrower from excess
cash flow (as defined) to the extent necessary to enable the Borrower to meet
its financial obligations. Borrowings under the Bank Facility are secured by
pledges of (i) the shares of common stock of NorAm held by Houston, (ii) all of
the limited and general partner interests of the Borrower and all of Houston's
interest in the general partner of the Borrower, (iii) the capital stock of HI
Energy, (iv) the capital stock of significant subsidiaries of Houston, (v) the
Preference Stock and (vi) certain intercompany notes held by the Borrower. The
obligations under the Bank Facility are not secured by the utility assets of
Houston or NorAm or by Houston's investment in Time Warner.
Borrowings under the Bank Facility bear interest at a rate based upon
either the London interbank offered rate plus a margin or a base rate plus a
margin or at a rate determined through a bidding process.
Pursuant to the Bank Facility, Houston has agreed, among other things,
not to permit its ratio of consolidated indebtedness for borrowed money to
consolidated capitalization to exceed 0.64:1.00 from October 1, 1997 through
December 31, 1997; 0.62:1.00 from January 1, 1998 through December 31, 1998;
and 0.60:1.00 from January 1, 1999 until termination of the Bank Facility. In
addition, Houston has agreed to certain limitations and restrictions on (i)
liens, (ii) consolidations, mergers and disposals of assets, (iii) dividends
and repurchases of common stock, (iv) certain types of investments and (v)
certain changes in its business. The Bank Facility also contains customary
covenants and default provisions applicable to the Borrower and its
subsidiaries, including limitations on the ability of the Borrower and its
subsidiaries to, among other things, incur additional indebtedness (other than
certain permitted indebtedness), create liens and make investments or loans.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratios of earnings to fixed charges for the six and
twelve months ended June 30, 1997, were 2.40 and 2.86, respectively. The
Company believes that the ratio for the six-month period is not necessarily
indicative of the ratio for a twelve-month period due to the seasonal nature of
HL&P's business.
HL&P
SOURCES OF CAPITAL RESOURCES AND LIQUIDITY
As of June 30, 1997, HL&P had approximately $157 million of commercial
paper outstanding. HL&P's commercial paper borrowings are supported by a bank
line of credit of $400 million.
For information regarding the redemption of HL&P's $9.375 cumulative
preferred stock (at a cost of $25.7 million, plus accrued dividends) and the
purchase of certain of its outstanding first
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26
mortgage bonds (at a cost of $69.6 million, plus accrued interest) in the
second quarter of 1997, see Notes 3 and 4 to the Interim Financial Statements.
RATIOS OF EARNINGS TO FIXED CHARGES
HL&P's ratios of earnings to fixed charges for the six and twelve
months ended June 30, 1997 were 3.43 and 4.03, respectively. HL&P's ratios of
earnings to fixed charges and preferred dividends for the six and twelve months
ended June 30, 1997, were 3.34 and 3.73, respectively. HL&P believes that the
ratios for the six-month period are not necessarily indicative of the ratios
for a twelve-month period due to the seasonal nature of HL&P's business.
NEW ACCOUNTING ISSUES
The Financial Accounting Standards Board recently issued
SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information" effective for financial
statements issued for periods beginning after December 15, 1997. SFAS No. 130
requires that all items that meet the definition of a component of comprehensive
income be reported in a financial statement for the period in which they are
recognized and the total amount of comprehensive income be prominently displayed
in that same financial statement. Comprehensive income is defined as the change
in equity of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources. Currently, the Company does
not have any material items which require reporting of comprehensive income.
SFAS No. 131 requires that companies report financial and descriptive
information about reportable operating segments in financial statements. Segment
information to be reported is to be based upon the way management organizes the
segments for making operating decisions and assessing performance. The Company
will adopt SFAS No. 130 and SFAS No. 131 beginning the first quarter of 1998.
For information regarding SFAS No. 128, "Earnings Per Share," which
will be effective for the Company's 1997 fiscal year, see Note 3 to the Interim
Financial Statements and Note 5 in the First Quarter 10-Q.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
For a description of legal proceedings affecting the Company
and its subsidiaries, including HL&P and HI Energy, reference
is made to the information set forth in (i) Item 3 of the Form
10-K and Notes 2(b), 3, 10 and 11(c) to the Form 10-K and (ii)
Note 8 to the First Quarter 10-Q, which information, as
qualified and updated by the description of developments in
litigation matters contained in Note 7 to the Notes to the
Interim Financial Statements included in Part I of this
Report, is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Reference is made to the information set forth in Item 4 of
the First Quarter 10-Q, which information is incorporated
herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. (Exhibits designated by an asterisk (*) are
incorporated herein by reference to a separate filing as
indicated.)
Houston Industries Incorporated:
*Exhibit 4 - Form of Indenture governing 7% Automatic Common
Exchange Securities due July 1, 2000 between the
Company and The First National Bank of Chicago, as
Trustee (incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-3
(Reg. No. 333-30443)).
Exhibit 10(a) - Eighth Amendment to the Executive Incentive
Compensation Plan of the Company (As Amended and
Restated Effective January 1, 1991) effective January
1, 1997.
Exhibit 10(b) - Seventh Amendment to the Deferred Compensation Plan
of the Company (As Established Effective September 1,
1985) effective January 1, 1997.
Exhibit 10(c) - Seventh Amendment to the Deferred Compensation Plan
of the Company (As Established Effective January 1,
1989) effective January 1, 1997.
Exhibit 10(d) - Eighth Amendment to the Deferred Compensation Plan of
the Company (As Established Effective January 1,
1991) effective January 1, 1997.
Exhibit 10(e) - First Amendment to the 1994 Long-Term Incentive
Compensation Plan of the Company (Effective January
1, 1994) effective May 9, 1997.
Exhibit 10(f) - Credit Agreement dated as of August 6, 1997, by and
among Houston Industries FinanceCo L.P., the Company,
Chase Securities, Inc., Chase Manhattan Bank and the
other banks named therein.
Exhibit 11 - Computation of Earnings per Common Share and Common
Equivalent Share.
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28
Exhibit 12 - Computation of Ratios of Earnings to Fixed Charges.
Exhibit 27 - Financial Data Schedule.
Exhibit 99(a) - Notes 1(b), 1(n), 1(o), 1(p), 2, 3, 11 and 16 to the
Financial Statements included on pages 57 through 62,
pages 73 through 74 and page 77 of the Form 10-K.
Exhibit 99(b) - Notes 2, 5, 6, 7 and 8 to the Financial Statements
included on pages 13 through 17 of the First Quarter
Form 10-Q.
Exhibit 99(c) - Third Amendment to the Houston Industries Energy,
Inc. Long-Term Project Incentive Compensation Plan
(As Established Effective January 1, 1994) effective
January 1, 1997.
Houston Lighting & Power Company:
*Exhibit 10(a) - Eighth Amendment to the Executive Incentive
Compensation Plan of the Company (As Amended and
Restated Effective January 1, 1991) effective January
1, 1997 (incorporated by reference to Exhibit 10(a)
to the Company's Report on Form 10-Q for the quarter
ended June 30, 1997, File No. 1-7629).
*Exhibit 10(b) - Seventh Amendment to the Deferred Compensation Plan
of the Company (As Established Effective September 1,
1985) effective January 1, 1997 (incorporated by
reference to Exhibit 10(b) to the Company's Report on
Form 10-Q for the quarter ended June 30, 1997, File
No. 1-7629).
*Exhibit 10(c) - Seventh Amendment to the Deferred Compensation Plan
of the Company (As Established Effective January 1,
1989) effective January 1, 1997 (incorporated by
reference to Exhibit 10(c) to the Company's Report on
Form 10-Q for the quarter ended June 30, 1997, File
No. 1-7629).
*Exhibit 10(d) - Eighth Amendment to the Deferred Compensation Plan of
the Company (As Established Effective January 1,
1991) effective January 1, 1997 (incorporated by
reference to Exhibit 10(d) to the Company's Report on
Form 10-Q for the quarter ended June 30, 1997, File
No. 1-7629).
*Exhibit 10(e) - First Amendment to the 1994 Long-Term Incentive
Compensation Plan of the Company (Effective January
1, 1994) effective May 9, 1997 (incorporated by
reference to Exhibit 10(e) to the Company's Report on
Form 10-Q for the quarter ended June 30, 1997, File
No. 1-7629).
*Exhibit 10(f) - Credit Agreement dated as of August 6, 1997, by and
among Houston Industries FinanceCo L.P., the Company,
Chase Securities, Inc., Chase Manhattan Bank and the
other banks named therein (incorporated by reference
to Exhibit 10(f) to the Company's Report on Form 10-Q
for the quarter ended June 30, 1997, File No.
1-7629).
Exhibit 12 - Computation of Ratios of Earnings to Fixed Charges
and Ratios of Earnings to Fixed Charges and Preferred
Dividends.
Exhibit 27 - Financial Data Schedule.
- 28 -
29
Exhibit 99(a) - Notes 1(b), 1(n), 1(o), 1(p), 2, 3, 11 and 16 to the
Financial Statements included on pages 57 through 62,
pages 73 through 74, and page 77 of the Form 10-K.
Exhibit 99(b) - Notes 2, 5, 6, 7 and 8 to the Financial Statements
included on pages 13 through 17 of the First Quarter
Form 10-Q.
(b) Reports on Form 8-K.
Report on Form 8-K of the Company and HL&P dated August 6,
1997.
- 29 -
30
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOUSTON INDUSTRIES INCORPORATED
(Registrant)
/s/ Mary P. Ricciardello
-------------------------------------
Mary P. Ricciardello
Vice President and Comptroller
(Principal Accounting Officer)
Date: August 14, 1997
- 30 -
31
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOUSTON LIGHTING & POWER COMPANY
(Registrant)
/s/ Mary P. Ricciardello
--------------------------------------
Mary P. Ricciardello
Vice President and Comptroller
(Principal Accounting Officer)
Date: August 14, 1997
- 31 -
32
INDEX TO EXHIBITS
Houston Industries Incorporated:
EXHIBIT
NO. DESCRIPTION
------- -----------
*Exhibit 4 - Form of Indenture governing 7% Automatic Common
Exchange Securities due July 1, 2000 between the
Company and The First National Bank of Chicago, as
Trustee (incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-3
(Reg. No. 333-30443)).
Exhibit 10(a) - Eighth Amendment to the Executive Incentive
Compensation Plan of the Company (As Amended and
Restated Effective January 1, 1991) effective January
1, 1997.
Exhibit 10(b) - Seventh Amendment to the Deferred Compensation Plan
of the Company (As Established Effective September 1,
1985) effective January 1, 1997.
Exhibit 10(c) - Seventh Amendment to the Deferred Compensation Plan
of the Company (As Established Effective January 1,
1989) effective January 1, 1997.
Exhibit 10(d) - Eighth Amendment to the Deferred Compensation Plan of
the Company (As Established Effective January 1,
1991) effective January 1, 1997.
Exhibit 10(e) - First Amendment to the 1994 Long-Term Incentive
Compensation Plan of the Company (Effective January
1, 1994) effective May 9, 1997.
Exhibit 10(f) - Credit Agreement dated as of August 6, 1997, by and
among Houston Industries FinanceCo L.P., the Company,
Chase Securities, Inc., Chase Manhattan Bank and the
other banks named therein.
Exhibit 11 - Computation of Earnings per Common Share and Common
Equivalent Share.
Exhibit 12 - Computation of Ratios of Earnings to Fixed Charges.
Exhibit 27 - Financial Data Schedule.
Exhibit 99(a) - Notes 1(b), 1(n), 1(o), 1(p), 2, 3, 11 and 16 to the
Financial Statements included on pages 57 through 62,
pages 73 through 74 and page 77 of the Form 10-K.
Exhibit 99(b) - Notes 2, 5, 6, 7 and 8 to the Financial Statements
included on pages 13 through 17 of the First Quarter
Form 10-Q.
Exhibit 99(c) - Third Amendment to the Houston Industries Energy,
Inc. Long-Term Project Incentive Compensation Plan
(As Established Effective January 1, 1994) effective
January 1, 1997.
Houston Lighting & Power Company:
*Exhibit 10(a) - Eighth Amendment to the Executive Incentive
Compensation Plan of the Company (As Amended and
Restated Effective January 1, 1991) effective January
1, 1997 (incorporated by reference to Exhibit 10(a)
to the Company's Report on Form 10-Q for the quarter
ended June 30, 1997, File No. 1-7629).
*Exhibit 10(b) - Seventh Amendment to the Deferred Compensation Plan
of the Company (As Established Effective September 1,
1985) effective January 1, 1997 (incorporated by
reference to Exhibit 10(b) to the Company's Report on
Form 10-Q for the quarter ended June 30, 1997, File
No. 1-7629).
*Exhibit 10(c) - Seventh Amendment to the Deferred Compensation Plan
of the Company (As Established Effective January 1,
1989) effective January 1, 1997 (incorporated by
reference to Exhibit 10(c) to the Company's Report on
Form 10-Q for the quarter ended June 30, 1997, File
No. 1-7629).
*Exhibit 10(d) - Eighth Amendment to the Deferred Compensation Plan of
the Company (As Established Effective January 1,
1991) effective January 1, 1997 (incorporated by
reference to Exhibit 10(d) to the Company's Report on
Form 10-Q for the quarter ended June 30, 1997, File
No. 1-7629).
*Exhibit 10(e) - First Amendment to the 1994 Long-Term Incentive
Compensation Plan of the Company (Effective January
1, 1994) effective May 9, 1997 (incorporated by
reference to Exhibit 10(e) to the Company's Report on
Form 10-Q for the quarter ended June 30, 1997, File
No. 1-7629).
*Exhibit 10(f) - Credit Agreement dated as of August 6, 1997, by and
among Houston Industries FinanceCo L.P., the Company,
Chase Securities, Inc., Chase Manhattan Bank and the
other banks named therein (incorporated by reference
to Exhibit 10(f) to the Company's Report on Form 10-Q
for the quarter ended June 30, 1997, File No.
1-7629).
Exhibit 12 - Computation of Ratios of Earnings to Fixed Charges
and Ratios of Earnings to Fixed Charges and Preferred
Dividends.
Exhibit 27 - Financial Data Schedule.
Exhibit 99(a) - Notes 1(b), 1(n), 1(o), 1(p), 2, 3, 11 and 16 to the
Financial Statements included on pages 57 through 62,
pages 73 through 74 and page 77 of the Form 10-K.
Exhibit 99(b) - Notes 2, 5, 6, 7 and 8 to the Financial Statements
included on pages 13 through 17 of the First Quarter
Form 10-Q.